ZeroStack, a Nasdaq-listed crypto treasury company formerly known as cannabis seller Flora Growth, warned in its latest SEC filing that "substantial doubt exists" about its ability to continue operating over the next year after its holdings of 0G, the native token of the Zero Gravity blockchain, plunged in value, even as an acquisition nearly tripled its token holdings.
- The company held over 75 million 0G as of late June with about $163 million cost basis and approximately $15 million fair value, a 90.7% shortfall.
- It booked an $82.5 million first-half fair-value loss and over $61 million net loss, according to its quarterly the filing.
A $107 million deal worth $25 million
In late March, ZeroStack said in a press release that a new $107 million crypto financing would "strengthen its balance sheet."
Investors contributed over 142 million 0G to Texas Blocker, a vehicle formed by ZeroStack's chief executive and finance chief, in exchange for 9.1 million shares.
- The parties valued the tokens at about $0.75 each, or $107 million. Although ZeroStack expected to acquire Texas Blocker "on or around July 5," the share exchange closed 15 days later on July 20.
- During that delay, 0G fell about 16%, reducing the tokens' value from about $30 million to $25 million, 76.7% below the valuation used in the deal, per data from CoinGecko, The Coinformer noticed.
ZeroStack now depends largely on selling 0G tokens earned from staking to cover expenses, leaving its survival tied to the token's price and liquidity. Management said those rewards and potential treasury sales may provide enough cash, but it "cannot conclude" that the plan will work.